How a badly-written press release killed the tech's largest bank
And why you should care.
Unless you live under a rock, you likely heard once or twice of the Silicon Valley Bank in the last few weeks.
The SVB failure was painted as another greedy American bank, capitalising on volatile investment for profits, who got caught by its short-term strategy before filing for bankruptcy.
In truth, the story behind the failure of SVB is much banaler—and frankly stupid. In short, it could have been avoided with a little common sense and know-how in communications.
This article is based on this story by Mission. Check it out to read the full story.
Silicon Valley Bank: the bank for the US tech industry and investors
A little bit of context first.
Silicon Vally Bank enjoyed the boom in the tech industry of the last decade and invested massively in US treasuries and mortgage-backed securities. This investment lost value recently, and the bank had to sell them at a loss of $1.8 billion.
Until here, nothing dramatic. It’s not all great for SVB, but banks lose some and gain some. Overall, SVB was not extremely more precarious than any other large bank.
On top of it, the bank successfully raised $2 billion in capital, which was more than enough to cover the debt. To celebrate the raise, and possibly to treasure stakeholders about the loss, the SVB decided to publish a press release.
A poorly-timed and badly-written press release
At the same time, another institution in Silicon Valley was having a much harder time. Crypto-bank Silvergate was filing for liquidation.
On the day of the announcement of Silvergate’s liquidation, the management of the SVB decided to issue a press release to inform the public, its clients, and possibly potential investors that it raised $2 billion.
The first paragraph of the document explains the raise in capital, giving minute details on the procedure, the actors involved, etc. But it is the second part that is more problematic.
At the end of the press release, the SVB writes:
Additionally, earlier today, [sic] SVB completed the sale of substantially of its available for sale securities portfolio. SVB sold approximately $21 billion of securities, which will result in an after tax loss of approximately $1.8 billion in the first quarter of 2023.
Incredible: the SVB announces publicly having lost $1.8 billion, without further comment! This infuriated investors and clients of the SVB, who, startled by the Silvergate failure on the same day, started to withdraw their deposits.
In less than 24 hours, SVB had lost about $42 billion of assets.
You know the rest of the story: as clients and investors left en masse, the US government kicked in to secure the assets of the bank. The harm was done. SVB was no more.
A further note on the content of the Press Release. The first paragraph is a monster of technical terms aimed at financially-wise people. Not tech heads and regular clients of the bank.
Who was the target of this communication? That’s not clear. SVB should have aimed at reassuring its partners and clients about the—temporary—losses due to accidental economic consequences, but that the raise in capital would help put the bank back on track.
Not add a side note “ho and by the way, we just lost $1.8 billion.”
This could happen to you
Just like house painting or HR management, communication is a job.
By writing a finance-oriented press release instead of crafting a narrative around the capital raise and their earlier loss, SVB made an existential mistake.
Public Affairs specialists, from time to time, should require the advice and services of communications specialists, and copywriters before sending a major press release or any communication material.
Better safe than sorry: ask a specialist.
If SVB made this effort, they probably would still be around.
Don’t make the same mistake: feel free to reach out if you need professional advice on your organisation’s communication, strategy, or documentation.
Before you leave…
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